The Nifty 50 index dropped 6.7% in September, marking its sharpest monthly decline in a quarter-century. Rising global bond yields and heavy foreign selling have driven the index into a seven-week losing streak. Investors are now watching to see if the index can find support near the 22,600 level in October.
The Nifty 50 index ended September with a 6.7% decline, marking its steepest monthly fall in 25 years. This performance reflects a difficult period for the Indian equity market, which has been under consistent selling pressure for seven consecutive weeks.
The decline is driven by several macroeconomic factors. Global crude oil prices have surged, while the US 10-year Treasury yield is hovering near 5.2%. This creates pressure on emerging markets like India by making them less attractive to international capital. Locally, the Indian 10-year government bond yield has crossed 7.1%, and the rupee is trading near the ₹96.50 per dollar mark. These conditions have contributed to a difficult environment for equity valuations.
Technically, the index has slipped below its 50-day and 200-day moving averages, which are levels used by traders to determine long-term price trends. The derivatives market highlights the current bearish sentiment. Open interest in the Nifty increased by 21.1% entering the October series, suggesting that traders are creating new short positions rather than just closing old ones. Foreign Institutional Investors (FIIs) have been the primary sellers, holding a record 2.67 lakh index short contracts, the highest volume seen in recent history.
Despite the broad selling, there is a difference in behavior between investor groups. While foreign investors have been selling, domestic institutions and retail investors have been increasing their long positions. This has led to varied results across sectors. Healthcare stocks, such as Aurobindo Pharma and Zydus Lifesciences, have shown resilience and attracted some buying interest. Conversely, the information technology and real estate sectors have faced significant pressure, with fresh short-selling seen in major developers and long positions being closed out in large-cap IT firms.
Looking ahead to October, analysts are keeping a close eye on the 22,600 support level, which aligns with the Nifty’s 200-week simple moving average. The market's ability to find a floor will depend on whether crude oil prices stabilize and if the intensity of foreign selling begins to slow. For investors, the next important update will be the movement of global yields and whether domestic buying can offset the current foreign outflow.